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Applicable for:
| New effective date:
| ||
Fiscal years beginning after
| Interim periods
| ||
Revenue (updated)
|
| December 15, 2017
(no change)
| Same year
|
All other entities that have not yet issued financial statements or made financial statements available for issuance as of June 3, 2020 reflecting adoption of ASC 606
| December 15, 2019
| Following year
| |
Leases (updated)
|
| December 15, 2018
(no change)
| Same year
|
Not-for-profit entities that have issued, or are conduit bond obligors for, securities that are traded, listed, or quoted on an exchange or an OTC market that have not yet issued financial statements or made financial statements available for issuance as of June 3, 2020 reflecting adoption of ASC 842
| December 15, 2019
| Same year
| |
All other entities not included above
| December 15, 2021
| Following year
| |
Hedging
| Public business entities
| December 15, 2018
(no change)
| Same year
|
All other entities
| December 15, 2020
| Following year
| |
Credit losses
| Public business entities that are SEC filers, excluding Smaller Reporting Companies
| December 15, 2019
(no change)
| Same year
|
All other entities
| December 15, 2022
| Same year
| |
Goodwill impairment
| Public business entities that are SEC filers, excluding Smaller Reporting Companies
| December 15, 2019
(no change)
| Same year
|
All other entities
| December 15, 2022
| Same year
| |
Long-duration insurance contracts
| Public business entities that are SEC filers, excluding Smaller Reporting Companies
| December 15, 2021
| Same year
|
All other entities
| December 15, 2023
| Following year
|
Question | Answer | |||
1. Gaining SRC status after November 15, 2019
If a calendar year-end SEC filer was not an SRC as of June 28, 2019 (its most recent filer status determination before the date the ASUs were issued, November 15, 2019) but becomes an SRC after November 15, 2019, what bucket would the company fall into when determining the effective date of the credit losses, goodwill impairment, and long-duration insurance contracts standards? | Bucket one. The company was not an SRC as of June 28, 2019 (its most recent filer status determination before the date the ASUs were issued, November 15, 2019). Therefore, it would still be in bucket one even if it subsequently becomes an SRC. | |||
2. Losing SRC status after November 15, 2019
If a calendar year-end SEC filer that qualifies as an SRC as of the end of its second quarter (June 28, 2019) loses its SRC status after November 15, 2019, the date the ASUs were issued, what bucket would the company fall into when determining the effective date of the credit losses, goodwill impairment, and long-duration insurance contracts standards?
| Bucket two. The FASB noted that the SRC determination is a one-time assessment, and decided against requiring an SEC filer SRC that loses its SRC status after November 15, 2019 to adopt the standards using the earlier effective dates. | |||
3. Pre-IPO
A calendar year-end private company files a Form S-1 in early 2020 in preparation for an IPO and becomes a public company in the second quarter of 2020 when its registration statement becomes effective. It is not an SRC or EGC. Would the company need to adopt the credit losses and goodwill impairment standards (which are effective in January 2020 for calendar-year-end PBEs that are SEC filers, excluding SRCs) in its Form S-1?
| No. The company would not be required to adopt the credit losses and goodwill impairment standards in its Form S-1 because a private company that files an S-1 in preparation for an IPO is not an SEC filer (although it would become one when its registration statement becomes effective). Therefore, it cannot be a PBE that is an SEC filer and would not be required to adopt the standards on the bucket one timeline in its Form S-1 in 2020. However, it is leading practice for a company in this situation to adopt these standards in its Form S-1 using the earlier effective dates. | |||
4. Post-IPO (2020)
Assume the same facts as Question 3. Would the company need to adopt the credit losses and goodwill impairment standards in its 2020 Form 10-K and second quarter 2020 Form 10-Q?
| Yes. Since the company is not an SRC, it would need to adopt the credit losses and goodwill impairment standards as of January 1, 2020 (bucket one timeline) in both its 2020 Form 10-K and its second quarter 2020 Form 10-Q. Even though it is first adopting in the second quarter of 2020, the company would need to push back the adoption to January 1, 2020 in the second quarter 2020 Form 10-Q and the 2020 Form 10-K. | |||
5. Post-IPO (2020) - SRC
Assume the same facts as Questions 3, except that the private company is an SRC in its Form S-1 filing. Would the company need to adopt the credit losses and goodwill impairment standards in its 2020 Form 10-K and second quarter 2020 Form 10-Q?
| No. The company would not be required to adopt the credit losses and goodwill impairment standards until January 2023, although early adoption is permitted. At the 2019 AICPA Conference on Current SEC & PCAOB Developments, a member of the SEC staff stated that it would not object to a company that is an SRC in its Form S-1 filing adopting the credit losses and goodwill impairment standards using the bucket two effective dates, even after its registration statement becomes effective. | |||
6. S-X Rules 3-05, 3-09, 3-10
Into what bucket would a company that is a PBE solely because its financial statements are included in another entity's SEC filing due to the requirements of S-X Rules 3-05, 3-09, or 3-10 (i.e., businesses acquired or to be acquired, equity method investments, and guarantors) fall?
| Bucket two. Although entities whose financial statements are included in another entity's SEC filing due to S-X Rules 3-05, 3-09, and 3-10 are PBEs, that does not, by itself, make them SEC filers and, thus, they are not bucket one (assuming that they don't otherwise qualify as SEC filers). | |||
7. Losing EGC status (2020)
A calendar year-end EGC elects to follow the transition guidance for nonpublic entities and plans to adopt the new credit losses, goodwill impairment, and long-duration insurance contracts standards using bucket two adoption dates. If the registrant loses its EGC status effective December 31, 2020, as of what date is the company required to adopt these standards, assuming the company was not an SRC as of June 28, 2019 (its most recent filer status determination before ASU 2019-09 and ASU 2019-10 were issued on November 15, 2019)?
| SEC Financial Reporting Manual 10230.1 indicates that an EGC that loses its status after it otherwise would have had to adopt a standard absent the extended private company transition afforded EGCs generally has to adopt the standard in its next filing after losing status. In this case, the registrant should reflect the adoption of the new credit losses and goodwill impairment standards as of January 1, 2020 in its December 31, 2020 annual filing because it is no longer an EGC and is in bucket one. The long-duration insurance contracts standard would be effective for this company in January 2022 on the bucket one timeline.
In addition to adopting the credit losses and goodwill impairment standards in the 2020 annual financial statements, the registrant has to reflect these standards in its 2020 quarterly financial information presented in its 2020 Form 10-K. Clear and transparent disclosures, as required by S-K 302(a)(2), should be included to indicate that the 2020 quarterly information presented in the 2020 Form 10-K differs from the 2020 quarterly information presented in the company's 2020 Form 10-Qs. In addition, the 2020 comparative quarterly information presented as part of the company's 2021 Form 10-Qs would need to be revised to reflect the application of the new standards.
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8. Losing EGC status (2021)
Assume the same facts as Question 7 except that the registrant loses its EGC status effective December 31, 2021. As of what date is the company required to reflect the adoption of the credit losses, goodwill impairment, and long-duration insurance contracts standards?
| The registrant should reflect the adoption of the new credit losses and goodwill impairment standards as of January 1, 2021 in its December 31, 2021 annual filing because it is no longer an EGC and is in bucket one. The long-duration insurance contracts standard would be effective for this registrant in January 2022 on the bucket one timeline. We understand that the SEC will not object to a registrant that loses its EGC status in 2021 adopting the credit losses and goodwill impairment standards as of the beginning of that year (January 1, 2021), rather than recasting the 2020 comparative financial statements in the Form 10-K. Similarly, we understand that the SEC will not object to a registrant that loses its EGC status in 2023 adopting the long-duration insurance contracts standard as of the beginning of that year (January 1, 2023), rather than recasting the 2022 comparative financial statements in the Form 10-K.
In addition to adopting the credit losses and goodwill impairment standards in the 2021 annual financial statements, the registrant has to reflect these standards in its 2021 quarterly financial information presented in its 2021 Form 10-K. Clear and transparent disclosures, as required by S-K 302(a)(2), should be included to indicate that the 2021 quarterly information presented in the 2021 Form 10-K differs from the 2021 quarterly information presented in the registrant's 2021 Form 10-Qs. In addition, the 2021 comparative quarterly information presented as part of the company's 2022 Form 10-Qs would need to be revised to reflect the application of the new standards.
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